You are currently viewing How To Secure Government Funding For Solar Panels: A Step-by-Step Guide for U.S. Families (Updated for 2025)

If you’re asking how to secure government funding for solar panels, learning how to access the available government incentives like tax credits has become more accessible, thanks in large part to the Inflation Reduction Act (IRA).

This guide will walk you through the steps to understand and utilize these opportunities. (Note: This guide provides general information. Tax laws and incentive programs can change; always consult official sources and qualified professionals for advice specific to your situation. Linked external resources should also be checked for the most current information.)

The federal Investment Tax Credit (ITC) is a major incentive, structured as a tax credit, while state and local programs can offer additional rebates or credits to further reduce your costs.

This step-by-step guide will help homeowners—and renters exploring options like community solar—navigate the process of adopting solar energy for home use and leveraging available incentives.

We’ll discuss federal and state incentives, how to apply, and possible challenges to consider.

Step 1: Understand The Federal Investment Tax Credit (ITC)

The IRA has extended the 30% Investment Tax Credit (ITC) for the cost of residential solar panel system installations through 2032.

This credit reduces your federal tax liability. It can potentially be combined with additional federal “bonus” credits under certain conditions, significantly lowering installation costs. Here’s how it works:

Eligibility for Base vs. Bonus Credits

  • Base 30% ITC: To qualify for the standard 30% credit, the solar energy system must typically be new, owned by the taxpayer (not leased), installed at a residence in the U.S., and placed in service during the qualifying period (generally 2022-2032 for the 30% rate). Importantly, while understanding which solar panels are best
    for your home involves considering efficiency, brand, and cost, the country of origin for the panels themselves generally does not affect eligibility for this base 30% credit.
  • Bonus Credits: Additional “bonus” tax credits (adders) are available under the IRA, but these have specific, separate requirements. One such bonus is the Domestic Content bonus. To potentially qualify for this 10% adder, the system must meet strict requirements for using certified U.S.-manufactured iron, steel, and other components, verified through supplier documentation. (See the IRS Domestic Content Bonus Credit page: https://www.irs.gov/credits-deductions/domestic-content-bonus-credit).

Potential Federal ITC Bonus Credit Adders (Stacking Rules Apply)

The IRS allows homeowners to potentially stack certain bonus credits on top of the 30% base credit, subject to meeting all requirements for each bonus. (Note: State or local incentives are separate and have their own rules). Key potential federal bonuses include:

  • Requires using sufficient certified U.S.-made iron, steel, and manufactured products within the system. Verification is essential, and understanding the documentation needed for the domestic content bonus requires careful review of supplier certifications and IRS guidance found on the IRS Domestic Content Bonus Credit page: https://www.irs.gov/credits-deductions/domestic-content-bonus-credit.
  • 10% or 20% Bonus Credit for Low-Income Communities: Available only for specific projects serving qualifying low-income households or located in certain low-income areas/on Indian land. Crucially, this bonus requires applying for and receiving a specific allocation from the government under the competitive §48(e) program (Low-Income Communities Bonus Credit Program), succeeded by the §48E(h) program for projects placed in service in 2025+. It is capacity-limited each year and not automatically granted. The rate (10% or 20%) depends on the project category. (See the IRS program page for details and links to application portals: https://www.irs.gov/credits-deductions/clean-electricity-low-income-communities-bonus-credit-amount-program).
  • 10% Bonus Credit for Energy Communities: Available for projects located in defined energy communities (e.g., areas historically reliant on fossil fuels, such as those impacted by coal mine or power plant closures). (Check project location eligibility using the official DOE mapping tool and guidance available via EnergyCommunities.gov: https://energycommunities.gov/energy-community-tax-credit-bonus/).

How Bonus Stacking Can Work (Example):

A hypothetical solar panel system meeting the criteria for an energy community and meeting the domestic content

requirements could potentially qualify for a 50% federal tax credit (30% base + 10% energy community + 10% domestic content).

If a system also met the stringent requirements for the Low-Income Communities Bonus and successfully received a 20% allocation, and met the Domestic Content requirements, the total federal credit could theoretically reach 60% (30% base + 20% low-income + 10% domestic content).

However, achieving this 60% requires meeting all criteria and successfully obtaining the competitive allocation for the Low-Income Communities bonus, which can be complex and is not guaranteed for most individual homeowners’ rooftop systems.

Pro Tip: While federal credits stack according to IRS rules, always check for available state and local incentives (rebates, state tax credits, grants) as these operate separately.

To review official details on the base credit, see the IRS Residential Clean Energy Credit page: https://www.irs.gov/credits-deductions/residential-clean-energy-credit

Step 2: Research State-Specific Incentives

In addition to the federal ITC, many states, municipalities, and utilities offer their own solar energy incentives. These vary widely and change frequently. Examples include:

  • California: Navigating changes like NEM 3.0 (which reduced compensation for excess solar energy sent to the grid) often involves strategies like adding battery storage. Utilities use Time-of-Use (TOU) rates impacting costs.
  • Illinois: Programs like Illinois Shines aim to expand solar access, particularly for low-income residents.
  • Massachusetts: Offers programs like the Mass Solar Loan providing favorable financing.

Visit your state’s energy department website or the DSIRE database (https://www.dsireusa.org/) (Database of State Incentives for Renewables & Efficiency) to check for current incentives in your area.

Step 3: The Solar for All Program

In 2023, the EPA launched the Solar for All initiative, providing $7 billion in grant funding (distributed via states, territories, tribal governments, and non-profits) to establish programs increasing access to solar for low-income households, often through community solar or rooftop solar initiatives.

Implementation began over the past couple of years, and programs are actively rolling out via awardees. Check the EPA Solar For All page (https://www.epa.gov/green-power-markets/solar-all) and your state energy office for updates on local availability.

Step 4: Learn How You Will Pay for Your Solar Energy System & Claim Incentives

After identifying available incentives, explore financing options. Here are some choices:

  • PACE Financing: The Property Assessed Clean Energy (PACE) program allows property owners in select locations to finance systems through property taxes. Be aware it’s only available in limited states (e.g., California, Florida, Missouri) and can potentially complicate home sales.
  • Solar Loans: Specialized lenders, credit unions, and state programs (like the Mass Solar Loan example) may offer loans specifically for solar installations, sometimes with favorable terms.

Steps to Claim Credits and Rebates:

  1. Find an Installer: Choose a reputable, certified installer familiar with local requirements and available state/local incentives.
  2. File IRS Form 5695: The federal 30% ITC (and any applicable federal bonuses) is claimed by filing IRS Form 5695, Residential Energy Credits, with your federal tax return for the year the system is placed in service. Your installer cannot file this for you but may provide necessary cost documentation. (You can usually find the form and instructions via the main IRS Residential Clean Energy Credit page linked in Step 1, or by searching “Form 5695” on IRS.gov).
  3. Submit Required Documents: Keep meticulous records, including receipts, contracts, interconnection agreements, tax documents, utility bills, and proof of installation/commissioning.
  4. State/Local Applications: Rebates or incentives from your state, utility, or local government often require separate applications directly to those entities. Check their specific requirements and deadlines.

Step 5: Considerations to Look Out For

While incentives are beneficial, be aware of potential challenges:

  • Changes to Net Metering: Policies determining how you are compensated for excess solar energy sent to the grid vary by state and utility and can change (e.g., California’s NEM 3.0). Understanding your local policy is crucial for estimating savings. Installing battery storage can help maximize self-consumption of solar energy.
  • Supply Chain Delays: While improving, occasional supply chain issues for panels or components could still cause project delays. Discuss timelines with your installer.
  • Time-of-Use (TOU) Rates: If your utility uses TOU rates, electricity costs more during peak demand hours. Pairing solar panels with battery storage allows you to use stored solar power during these expensive periods.

Pro Tip: Check your local net metering rules and utility TOU rate schedule before installation to estimate savings accurately.

FAQs

  • Q: Are there solar energy incentives for renters?
    • Yes! While renters typically cannot install rooftop solar, many can subscribe to community solar programs. These allow participation in a larger, off-site solar project and receive credits on electricity bills, providing access to solar benefits. Learning how to find community solar programs near me often involves checking state energy agency websites, utility information, or specific provider directories. State/local programs may also offer specific renter-focused assistance. (Learn more about Community Solar basics at Energy.gov: https://www.energy.gov/eere/solar/community-solar-basics).
  • Q: What if I don’t owe enough taxes in one year to claim the full ITC?
    • The federal ITC is non-refundable (it can reduce your tax liability to zero, but you don’t get the excess back as a refund). However, any unused portion of the credit can generally be carried forward to reduce taxes in future years. The specific solar tax credit carryforward rules from the IRS dictate for how long this is possible (currently up to 20 years for credits generated under the IRA timeframe, but always check the latest Form 5695 instructions).

Conclusion

Thanks to significant federal tax credits and various state/local incentives, switching to solar energy for home use is more accessible.

By understanding the 30% federal ITC, investigating potential federal bonus credits (and their specific requirements), and exploring local rebates and programs, homeowners can potentially save significantly on solar installation costs.

Remember to check eligibility for state-specific programs, financing options like PACE or solar loans, and community solar if applicable.

Reminder: Incentive details, tax credits, program availability, and local policies can change. This information is current as of April 2025 but is for guidance only.

Always consult official sources (IRS.gov, Energy.gov, EnergyCommunities.gov, state energy offices) and qualified tax or solar professionals to ensure you understand the rules applicable to your specific situation and get the maximum benefits.